Retail Marketing Produce Short Course United Fresh Marketplace May 5, 5, 2007 Chicago, IL IL Presented by: Sponsored by: Perishables Group EuroFresh, Inc. Paul Marshall Produce, Inc. Produce Business Torrey Farms, Inc.
Tapping the Organic Opportunity in Conventional Supermarkets Presented by: Perishables Group
Project Approach and Sponsors First of its kind research project that included: Online survey of 2,000 organic/all natural consumers (December 2006) In-store intercepts of 350 consumers (January 2007) Organic shopping behavior 15,000 member fresh panel of Nielsen s Homescan Data Spectra Store Opportunity Finder (March 2007) SPINS provided natural foods consumer overview (22,000 consumers) Full study completed in April 2007 3
Research Approach \ 1. Consumer Purchase Intent and Triggers Internet Surveys Topline View Store Audits Market View Consumer Intercepts Store Level View POS (US/Regional results 16,000 stores) 2. Consumer Purchase History Homescan/Spins Panel Data Topline View Spectra Segmentation Market View 3. Predictive Consumer Behavior Spectra Clustering Store Level View CONSUMER Opportunity 4
Consumer Progression Trial Transitional Regular Committed Purchase Accidental Health Condition Good For Me Good For Me Rationale Promotion Diet/Allergy Good For My Family Good For My Family Diet/Allergy Good For Me Good Taste Good Taste Good For The World % of US Population 55% 25% 17% 3% % of TTL NP $ 13% 22% 38% 26% % of OG $ 7% 13% 35% 45% Categories Entry Point Partial Meals Complete Meals Complete Baskets Produce Meat, Seafood Yogurt Personal Care Meat, Seafood Eggs Pasta Sauce HH Cleaners Eggs Tea Snacks/Beverages Paper Products Tea Homeopathic Meal Replacements Supplements Vitamins, Minerals Diet Formulas Diet Formulas Organic Vitamins, Minerals 5
Homescan Shopper Activity Total Outlet Behavior Total RW Fruit & Veg Total U.S.- Heavy Organic Fruit Total U.S.- Light Organic Fruit Purchase Frequency 39.1 37.5 Purchase Size (Dollar Volume) 5.3 4.0 Purchase Cycle (Days) 8.1 8.3 % Dollar Volume on Deal 21.1 31.3 % Dollars in 2MM+ Grocery w/o Mass Super 72.3 82.3 % Dollars in Mass Merch Supers 6.3 7.3 Total RW Organic Fruit Purchase Frequency 10.1 1.4 Purchase Size (Dollar Volume) 3.7 1.7 Purchase Cycle (Days) 22.1 78.0 % Dollar Volume on Deal 16.8 33.8 % Dollars in 2MM+ Grocery w/o Mass Super 59.5 80.0 % Dollars in Mass Merch Supers 5.3 5.6 6
1. Conventional supermarkets have a significant, untapped sales opportunity 77% of consumers purchased organics in last six months 57% percent buying more than a year ago Existing sales dominated by heavy users - who shop alternative formats, but also conventional stores Light users (fastest growth) shop conventional stores 8
2. Leveraging the organic opportunity in conventional supermarkets starts in the produce department Produce is the entry point Greatest consumer trial rates Greatest understanding of offering Light organic users shop first in conventional stores 9
3. Quality and appearance the key purchase drivers, especially among light users Conventional products set benchmark Quality and appearance top purchase factor Brand ranked last in purchase considerations 10
4. Organic health halo can be leveraged by conventional stores in fresh foods 70% said organics are better for you than conventional Health factors more important than environmental issues to light users Organic fresh foods drive overall image of store among consumers, currently missed among supermarkets 11
5. Organic price is the key purchase barrier, but consumers expect to pay more Among light users, a majority will pay up 20 percent above conventional Conventional supermarket shoppers more active in comparing price/value versus quality 12
6. Organic shoppers in conventional stores are very different from primary natural food store shopper Light users driven by convenience and price Less likely to shop natural outlets More active in shopping Not committed to organic lifestyle Unlikely to seek out organics Key success words: convenient, accessible, comparable 13
7. Growth is large, market is small Growth rate is five times conventional produce About three percent of total produce sales Key items are critical: packaged salad, carrots, apples, bananas New items drive growth: tomatoes, berries, grapes 14
8. Store selection and product substitution are key Supermarket organic target is: Suburban, college grad, older, small household, $100K income Urban organic consumer more committed to alternative format stores Strategic product substitution important Control SKUs, improve visibility, leverage organic image 15
9. Proper margin and pricing critical East region is strongest Everyday organic pricing is lowest with largest promotional discounts (-19 percent) Smallest difference between average conventional and organic ($0.54) South region is weakest Everyday organic pricing is highest with smallest promo discounts (-11 percent) Largest difference between average conventional and organic ($1.07) 16
Panel Discussion Marvin Lyons Tracy King Brian McElroy Rick Steigerwald Scott Owens Billy Heller Biggs/Super Valu Dovex Fruit Company Driscoll Berry Associates Lunds/Byerly s Paramount Citrus SunRipe Produce Company